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Handout
This master’s level course provides learners a rigorous introduction to the fundamentals of modern
finance and their applications to business challenges in valuation, investment and risk
management, and corporate financial decisions. This course focuses on four topics:
1. The financial challenges firms and households face and the principles of modern finance
in tackling these challenges;
2. Valuation of fixed income securities and common stocks;
3. Risk analysis, the Arbitrage Pricing Theory (APT), and the Efficient Market Hypothesis
(EMH);
4. Introduction to corporate finance and capital budgeting.
This class shares most of the content with the first half of MIT’s Master of Finance course 15.415.
Course Materials
Recommended Textbook: Brealey, Myers, and Allen, Principles of Corporate Finance (13e), Irwin/McGraw
Hill. (BMA)
Recommended Textbook: Bodie, Kane, and Marcus, Investments (11e), Irwin/McGraw Hill. (BKM)
Course Structure
This course consists of an introductory lecture module, 10 Lectures, 10 Problem Sets, 10 Recitations
demonstrating how to solve problems like those contained in the problem sets, and a Final Exam.
Introduction
Course Introduction and How to Take this Course
Prof. Egor Matveyev
Introduction to Finance
Financial decisions of households and corporations
Week 1 Approaches to valuing financial and real assets
Prof. Jiang Wang An overview of the financial market and its role
Unifying principles of finance
Problem Set 1
Common Stocks
Discounted Cash Flow (DCF) model
Week 5 Gordon model, multi-stage growth model
Prof. Leonid Kogan Forecasting dividends
Valuation of growth opportunities and valuation multiples
Problem Set 5
Market Efficiency
Week 8 Efficient Market Hypothesis (EMH)
Implications of EMH
Prof. Leonid Kogan Empirical evidence on EMH
Problem Set 8
Capital Budgeting I
NPV rules
Week 10 Cash flows from capital investments
Prof. Jiang Wang Project interactions
Alternative capital budgeting rules
Problem Set 10